Capital Gains Tax Exemption to Reduce from £6,000 to £3,000 from April 2024

Category: Capital Gains Tax & Financial Life Planning & Tax Year End

In a move set to impact investors and individuals engaged in financial transactions, the UK government has announced a significant reduction in the capital gains tax (CGT) exemption, effective from April 2024. The current exemption of £6,000 will be halved to £3,000.

The decision to decrease the exemption comes amidst broader efforts by the government to address fiscal concerns and streamline taxation policies. While the specifics of the adjustment are still unfolding, it’s imperative for taxpayers to understand the implications of this change and plan accordingly.

Understanding Capital Gains Tax:

Capital gains tax is levied on the profit made from the sale of certain assets, such as stocks, bonds, property, and valuable personal possessions, above a certain threshold. The current threshold, set at £6,000, allows individuals to make gains up to this amount without incurring any tax liability.

Impact of Reduction:

From April 2024, individuals will only be able to earn up to £3,000 in capital gains tax-free. Any gains exceeding this threshold will be subject to taxation at 10% or 20% depending on the individual’s income tax band.

For investors and individuals with significant capital assets, this change may necessitate a reassessment of their investment strategies and financial planning.

Planning Ahead:

Taxpayers are advised to proactively review their investment portfolios and consider any actions that may optimise their tax position. This could involve:

  1. Harvesting Gains: Consider realising capital gains before the April 2024 deadline to take advantage of the current, more favourable allowance.
  2. Tax-Efficient Investments: Explore investment opportunities that offer tax advantages, such as tax-efficient ISAs or pensions, to mitigate the impact of CGT.
  3. Loss Utilisation: Offset capital gains with capital losses from underperforming assets to reduce overall tax liability.
  4. Seek Professional Advice: Consult with your financial planner to assess individual circumstances and develop a tailored tax strategy.

Managing your exposure to CGT (where you may have one) is really important to minimise the tax in the future. If you have any concerns, do get in touch with your Serenity financial planner.

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